At any point during a pending sale, a condo association has the opportunity to exercise its right of first refusal. Outlined in the condo's bylaws, this right allows the condo board to match a potential buyer's offer and purchase the apartment. Providing the owners with some control over who can reside in the building, a right of first refusal is difficult to invoke. If a condo association does decide to exercise its right of first refusal, it must proceed quickly and in strict accordance with the condo bylaws. Specifics vary from condo to condo, but there are general steps a board can expect.
Review the condo bylaws regarding exercising the right of first refusal with other members of condo association. Note the time period set forth in the bylaws as well as the precise guidelines that must be followed. Though it varies from condo to condo, the time period for exercising a right of first refusal is likely short: about 20 to 30 days after an application is made to sell.
Schedule a unit owners' meeting as soon as possible. In most cases, condo bylaws will require a unit owners' meeting be held to discuss the board's decision not the waive the right of first refusal as well as the bylaws guidelines for exercising this right. A lawyer is commonly hired to attend this meeting and help address the requirements outlined in the condo's bylaws.
Cast a vote. To invoke a right of first refusal, condo bylaws commonly require the consent of a majority of the unit owners.
Notify the outside purchaser that he does not have a deal. No explanation is necessary other than that the association has decided to exercise its right of first refusal.
Purchase the condo under the terms and conditions specified for the outside purchaser and within time frame set forth in bylaws. Many condos do not have enough cash on hand and raising enough cash within the given time frame can be a deal breaker. In addition, condo bylaws often limit a board's ability to get financing.
Schedule a closing. If all of the requirements have been met within the allotted time period, the condo board can close on the property.
- The New York Times: Hurdles for Condo Buyers
- The Cooperator: What Your Board Should Know
- Habitat Magazine: Right of First Refusal
- National Council of State Housing Authorities. "FHA Issues New Review Requirements for Condominium Loans." Accessed May 11, 2020.
- First Heritage Mortgage. "What Is a Non-Warrantable Condo?" Accessed May 11, 2020.
- United States Government. "Code of Federal Regulations: Title 24, Housing and Urban Development. Part 234, Condominium Ownership Mortgage Insurance." Accessed May 11, 2020.
Kelly Miner Tunstall began writing professionally in 2005 upon receiving her BA in journalism from Ithaca College. She spent seven years working in New York City where she assisted in representing the sale of residential condos and co-ops. She also worked for and has been published in "The Cooperator."